The Persuaders Worried that your employees will join a union? PERHAPS THESE GENTLEMEN CAN HELP.

By Richard McGill Murphy

May 1, 2004

(FORTUNE Small Business) – If you're looking for Peter List, here's a hint: He works on the second floor of a small, wood-frame office building somewhere in the northeastern U.S., just off a two-lane road that slouches past strip malls and tract houses on its way to the Interstate. If you want more details you can try to e-mail him yourself, but we can't give them to you. "Don't even write what state I'm in," he says. "I don't need the Teamsters picketing out front."

Should the Teamsters show up, though, they might have trouble distinguishing List--with his long ponytail, straight-leg Levi's, beat-up cowboy boots, and Harley hog--from the guys on the picket line. At 39, he has the broad shoulders and wiry physique of a person who spent his early career manhandling heavy spools of telephone cable on an AT&T factory floor in Phoenix. Indeed, List was an enthusiastic trade unionist when he worked there, from 1984 to 1992. He signed a Communications Workers of America card during his first week on the job and eventually rose to become a chief shop steward and editor of the local union newspaper. But for the past decade, List has dedicated his life to fighting his former colleagues, advising companies across the country on ways to fend off union-organizing campaigns.

List is good at his job: Last year he fought 35 campaigns and won 32. His clients range from Fortune 500 corporations to tiny manufacturers with a dozen employees. People in List's line of work are often referred to as union busters, but he prefers to describe himself with such euphemisms as "educator" or "communication specialist." Although List gets paid (he won't say how much) to persuade workers that joining the union is not in their best interest, he's also reluctant to be called a persuader. "The unions would definitely play that against me," he says.

List's fear of union power seems almost quaint. The movement is, after all, in steep decline. Last year only 8.2% of private-sector employees belonged to a union, down from about one-third in the early 1950s. Particularly since the 1980s, big manufacturing companies have reacted to the fierce pressures of the globalized economy by downsizing plants, exporting jobs, and wringing maximum productivity out of their remaining workers. Those trends have weakened the bargaining power of the unions, making them less appealing to workers.

But as overall union membership has plummeted, the unions have increasingly turned to small businesses to attract new members. According to National Labor Relations Board statistics, the average collective-bargaining unit was just 62 workers in 2003, down from 70 in 2000. (The figures include divisions of larger corporations as well as independent companies.)

No business is too small to escape the attention of union organizers, as a string of recent Teamster campaigns makes clear. In December, PKS Road Oil Co. in Las Vegas voluntarily recognized a unit of five truck drivers. In January five employees of Royal Paper Stock in Bardstown, Ky., became Teamsters after a two-year dispute over a single challenged election ballot. And in March the Teamsters proudly announced the unionization of all six workers at a Wyandotte, Mich., silk-screening and embroidery company called Triple H Impressions.

It's easy to see why unions would target small businesses. As membership declines, union leaders increasingly lack the money and manpower to wage major campaigns against big companies. From an organizing perspective, small workforces tend to be more cohesive and less vulnerable to anti-union pressure from management. "Workers can stand together more [easily] if it's a small group," says Bob Callahan, director of health systems organizing at the Service Employees International Union, which represents 1.6 million health-care, janitorial, and other service workers across the country. And while big corporations employ hordes of lawyers and human-resources professionals to manage their labor issues, smaller companies are often unprepared for the highly technical challenge of fending off a union campaign.

That may help explain why the overall union "win rate" (the percentage of so-called representation elections in which workers vote the union in) has risen steadily for the past seven years, from 48.6% in 1996 to 57.2% in the first half of 2003, according to NLRB data. "The unions are winning more elections because they're going after smaller companies," says Patrick Stanton, a labor lawyer who chairs the labor relations section of the New Jersey Bar Association.

Even the most worker-friendly entrepreneur will find that fending off unions can quickly turn into a quagmire. During a union campaign, owners are legally forbidden from taking many actions or making any but the most innocuous statements. "It's a crippling six to eight weeks," says Steven Loures, 38, general manager of a South Amboy, N.J., ambulance company that recently fought a union-organizing campaign with help from List. "Management is stuck in a bubble: You can't fix anything, and you're being judged."

Although most entrepreneurs greet the prospect of unionization with the enthusiasm that medieval Europeans reserved for an outbreak of the Black Death, there are exceptions. Mike Murphy, 38, owns Aloysius Lyons, a New York City construction company with only four full-time employees, including him. None of Murphy's construction workers are on staff: He hires them through the union, which administers their health insurance and pension plan, relieving Murphy of those responsibilities. And although his labor costs are about 20% higher than those of his non-union competitors, he passes that cost on to the project owner. "I'm getting the cream of the crop," Murphy says. "These guys are paid a good wage, they get decent benefits, and they have better skills [than non-union workers]. Plus, if there's a problem with their benefits, they call the union."

But the vast majority of entrepreneurs would rather not deal with a unionized labor force, which often not only is more expensive but also imposes constraints on the owner's ability to run his business. In 2003 unionized workers earned a median weekly wage of $760, compared with $599 for non-union workers. And union work rules often require time-consuming grievance meetings over even the most trivial exchanges between workers and managers. "Shop stewards feel threatened when you talk to [your own] workers," says Kevin Brower, general manager of Philcorr, a corrugated-paper manufacturer based in Vineland, N.J., that has hired List to fend off two union-organizing campaigns since 1997. "You can't counsel, coach, or discipline anybody without a union rep present. It's a huge cost to the company."

All that helps explain the strong demand for Peter List and his colleagues in the persuasion business. List estimates that during the past ten years, 60% to 70% of his clients have been small-business owners. "That's where the bulk of the activity is," he says. And he is busy enough to have turned down several prospective clients this year.

List didn't plan to become an anti-union labor consultant. After AT&T outsourced his job to Mexico in 1992, he earned a degree in labor relations from a college in Arizona. His epiphany came in his senior year, when he wrote a thesis on the history of the union movement. Working mostly from AFL-CIO documents, List concluded that the unions "were blaming everybody but themselves for their own decline," he says. "They blamed Ronald Reagan, the structural shift from manufacturing to services--even Japanese imports. And the numbers just didn't add up."

Over time List developed a strongly pro-capitalist, antigovernment ideology that still guides him. As a firm believer in Ayn Rand's philosophy of radical individualism, he opposes all state efforts to regulate labor relations. The website of his company, the North American Employers Group, features links to Capitalism Magazine, the Center for the Moral Defense of Capitalism, and the Ayn Rand Institute. You won't find a business address or phone number on the site, however. The only way to reach List is by e-mail.

List has some cause to feel paranoid. Former union officials who earn their living fighting off union-organizing campaigns tend to be unpopular among their old comrades, to put it mildly. "We don't like them," Callahan of the SEIU says bluntly. "They're traitors." List says that he has been threatened a few times over the years, most recently in 2002, when a pro-union worker at an East Coast oil refinery approached him before a meeting and said, "We're getting tired of people like you coming around. We're all NRA members around here, and it gets awful dark at night."

Perhaps the most scathing condemnation of List's profession is Confessions of a Union Buster, Martin Jay Levitt's 1993 memoir of his years on the management side of labor relations. "Union busting is a field populated by bullies and built on deceit," Levitt writes. "The only way to bust a union is to lie, distort, manipulate, threaten, and always, always attack."

Dominick Mazza knows how ugly union battles can get. For the past three years the Teamsters have tried to unionize Mazza & Sons, his recycling and demolition firm based in Tinton Falls, N.J. At times, Mazza says, his 55-acre facility has become a battle zone. He says picketers have gotten into screaming matches with management, poured dirt into the gas tanks of company vehicles, and even punched one of his customers in the mouth.

The troubles began in early 2001, when Dominick, a brawny, middle-aged man who runs the company with his older brother Jimmy, hired a new truck driver who turned out to be a Teamsters infiltrator--a "salt," in union terminology. Over the next few weeks the salt started quietly encouraging Mazza's 35-odd employees to consider joining the Teamsters. Some workers were ready to listen: Having spent $3 million on a new recycling facility and another $1 million to bring the site into compliance with environmental regulations, the company was cash-strapped and hadn't given raises in several years. The salt began circulating fliers congratulating Mazza on the millions that the company was allegedly making with its upgraded facility and asking why the workers hadn't seen a dime in raises. "I told our guys to bear with us--we'll get through this together," Dominick says.

In April 2001 a Teamsters delegation visited Dominick and Jimmy at the site, claimed that a majority of workers wanted the union, and asked them to sign a collective-bargaining agreement. "We said no," Dominick recalled. "Immediately ten guys showed up out front waving signs, turning away trucks, cursing out customers. There was a lot of pushing and shoving."

The time had come to call Peter List, who showed up at Mazza & Sons with his own sheaf of handouts. List is very fond of handouts. One favorite shows a green pyramid graphic, studded with dollar signs, that explains the organizational structure of the union movement and suggests that unions are interested only in collecting dues. The pyramid is festooned with alarming assertions. "A union-shop (or union-security) clause can force you to pay the union to keep your job," reads one text box.

Over the next seven months List called the Mazzas every few weeks to coach them on what they legally could and could not tell their employees. For instance, he told them, management should never "SPIT on workers," an acronym that stands for "spy, promise, interrogate, or threaten." During a union campaign, it is illegal to promise workers a raise if they vote against the union, to threaten to shut down the company if the union wins, or even to ask workers what their grievances are. Nor can management implement any substantive changes in pay, benefits, or employment policies during a union campaign: You can't suddenly give everyone a raise, or lower their health insurance contribution, or install air conditioning on the factory floor. If you didn't allow workers into your office before the campaign started, you can't suddenly implement an open-door policy. (The NLRB views management offices as an inherently "coercive environment.") In short, you aren't allowed to fix the problems that led your workers to demand the union in the first place. If you do, the union may file an unfair labor practice charge with the NLRB, which in extreme cases can compel management to recognize the union without an election if it finds in the union's favor.

And whatever you do, never accept the union's invitation to attend an "informational" meeting with employees. According to List, those invitations are aimed at trapping company representatives into committing an unfair labor practice: Even if managers say nothing at the meeting, the union can argue that they were there to spy on the workers.

On the other hand, List told the Mazzas, it's perfectly legal to make factual statements: No union can keep a company in business if it is losing money. The union won't necessarily be able to win higher wages or better benefits--management's only requirement is to negotiate working conditions in good faith. Management is under no obligation to come to an agreement, and everything is on the table--bargaining can result in higher, lower, or status quo wages. If the negotiations reach an impasse, management has the right to impose its final offer unilaterally. At any point in the negotiations, the union can ask the workers to go out on strike. If the strike is over economic issues (wages and benefits, as opposed to unfair labor practices), management has the legal right to hire permanent replacement workers. Although striking workers must be given preference when future job openings occur, there's no guarantee that any striker will get his job back, and there are many documented cases of strikes that went on for years without resolution.

The message got through: After the first round of employee meetings, Dominick says, "lots of them came back and said they wished they hadn't signed the [union] cards." But that did not keep the Teamsters away. The picketing continued for seven months after that meeting. Eventually, though, as the months passed and the weather got colder, the picketers seemed to lose their enthusiasm. And one morning in December 2001, they were gone. Technically, Mazza & Sons is still due for a union election, but employees no longer seem interested; business has improved, and the company has given raises and sweetened its benefits package. Altogether, Dominick says, the company spent $300,000 keeping out the Teamsters. List says his own bill was a tiny fraction of that sum but won't give any more details.

When I visited list at his secret headquarters, he put me through a five-hour labor-relations seminar with the help of his business partner, James Hulsizer, a burly, chrome-domed 45-year-old who spent a decade as a senior Teamsters organizer. Hulsizer is a gregarious man whose natural salesmanship complements List's more reserved and legalistic style. Hulsizer told me that he left the Teamsters because he got sick of selling a defective product: In 80% of the companies that he organized, he claimed, the union did not succeed in obtaining a new labor contract. "I kept meeting people I'd organized years before who still didn't have a collective-bargaining agreement," he said. "And they'd be very pissed off at me. I was selling the product, but the union wasn't delivering."

The seminar was an extended version of the marketing presentation that List and Hulsizer give about once a month to audiences of prospective clients around the country. We covered the fine print of the National Labor Relations Act of 1935, the organization chart of the AFL-CIO, and innumerable war stories from the front lines of labor relations in America. And we also covered some of List's favorite acronyms. In addition to advising against SPITting, List tells his clients to "get a CLUE"--that's "Communicate, Listen, Understand, and Educate." List claims that 90% of all union campaigns are sparked by poor management communication. "If workers feel neglected, undervalued, or kept in the dark, they'll start talking to whoever will listen," List says. "Often that person is a union organizer. If you're not listening to your employees, then the union is."

"It's a matter of trust," says Paul Centenari, CEO of Atlas Container, a corrugated-box manufacturer in Severn, Md. Centenari, 47, hired List in 2001 to help persuade workers to decertify the union at a plant that Atlas had just acquired. The plant had been unionized for about 40 years. Centenari, who had long had an interest in open-book management, taught the workers to read financial statements and then shared the company's financial data with the entire staff. Centenari still encourages workers to come up with ideas to boost revenues and cut costs, and has brought a rare degree of democracy to the factory floor: Employees vote on major equipment purchases, general pay increases, and promotions. Today Atlas is union-free, and sales have grown from $5.5 million in 1990 to more than $65 million in 2003. "The workers trust us more than the union," Centenari says.

The CEO of a small New Jersey manufacturing company also found that he was able to head off a union campaign by coming clean about his firm's financial condition. The company had lost 60% of its U.S. market share in the previous nine years. Anxious to cut costs, management asked workers to pay part of their health-insurance premiums and imposed two rounds of layoffs, the first in the company's 70-year history. "People were scared," the CEO says. "They'd never seen layoffs before." The Teamsters approached his employees last year but eventually failed to unionize the company, the CEO says, after he opened up his finances and let workers see that there was no other option. "They had no idea we were spending $500,000 a year on health insurance," he says.

While list preaches openness, not all unions employ the same tactics. Steven Loures, the general manager of the South Amboy ambulance company, had no idea that his employees were thinking about joining the International Association of EMTs and Paramedics until the NLRB faxed him a petition in early January 2004. "I was shocked," Loures says.

Loures quickly brought in List and Hulsizer to help with the campaign. Hulsizer led about ten employee meetings, while List concentrated on drafting responses to the union's literature, including a blistering reply to the union's invitation for management to attend an informational meeting to "discuss the benefits of union membership." In the meetings Hulsizer stressed that the company's wage-and-benefit package was already superior to those of unionized competitors. He got his hands on one of the IAEP's collective-bargaining agreements with another local ambulance service and used it to great effect, pointing out that while the contract required all workers to pay union dues in order to keep their jobs (a so-called union-security clause), it guaranteed pay increases of only 2% to 2.5% a year. Loures's employees, on the other hand, had been getting increases of at least 6%.

The campaign was hotly contested: Loures claims that the union canvassed his EMTs while they were moving patients from outside the hospital to the ambulance. On one occasion, Loures says, IAEP organizers stationed themselves in the lobby of a hotel on Staten Island and buttonholed emergency workers on their way into one of Hulsizer's meetings. (A union spokesman confirmed that organizers were present at the hotel, but denied that any emergency workers were canvassed while transporting patients.) Loures estimates that he spent $35,000 on legal and consultant fees during the six-week campaign, a small sum compared with the Mazza campaign. Despite the union's best efforts, the final election tally was 160 votes against the union and 39 votes in favor.

Three weeks later I called up Matthew Levy, the 26-year-old organizer who led the Loures campaign and serves as the IAEP's director of organizing on the East Coast. He was still smarting from his defeat. "The company outspent us," he said. "They must have spent $10,000 a day over the last few days of the campaign."

"What did they spend it on?" I asked.

"They brought in some anti-union consultant who claimed he used to work for the Teamsters," Levy said. "He wouldn't give his last name."